Business plans help entrepreneurs stay motivated, work smarter, and even predict roadblocks. A business plan is like a roadmap for your business. It determines a course that is highly adaptable but still helps you stay on track. It also encourages disciplined thinking.
But what should you include?
There are 8 key elements of a quality business plan. Be sure to tailor them to your industry. A record label business plan, for example, would have to discuss the nuances of the record label industry. It would have to detail the specific customers they serve. And so on.
Below are the 8 key elements to include in your plan.
1. Executive Summary
This portion will provide readers with a brief snapshot of your business profile and goals. It’s usually the most ignored area of the plan but it’s also the most important. Why? Because business investors get to learn in just a few words why your company is going to be successful. An executive summary should include the following elements:
- a mission statement
- a vision statement
- a brief history of the company
- service or product summary
- highlight your business’ growth
- reasons for seeking financial investors
2. Market Analysis
This section of the business plan describes your niche or industry. It explains your target market and how your particular service or product will meet this population’s needs. It also mentions the size of the target market, the percentage of the market share you hope to gain, the cost of your service or product, and the expected gross margin.
The market analysis should also discuss the competitors in the industry – who they are, the percentage of the market they occupy, and their strengths and weaknesses. Talk about any barriers you might be facing for entering into the market, i.e. regulatory constraints.
3. Company Information
Use this part of the plan to talk about what your company actually does and how it’s different from the competition. Mention the markets you’re hoping to tackle in the future and even customer segments. Be sure to highlight the competitive advantages you have – this could be anything from a special machine, the location of your business, a talented chef, etc.
4. Company Organization
This is where your investors will learn whether you’re a sole proprietor, a partnership or a corporation. They will be interested to know who is actually in charge and what experience they bring to the table. The leader’s accomplishments, experience level, and percentage of ownership will be examined by the investors. Each person in your management team should submit a resume to include in the business plan – typically in the appendix. Their resume should cover the following:
- unique experiences
- past accomplishments
- community involvement
- term of employment, etc.
In this section, you also need to mention who is a part of your Board of Directors. Mention their roles and position in the Board, including general background, involvement with the business, contribution to the business’ success, etc.
5. Marketing & Sales
This part of the business plan will explain your strategy for growing the business once you’ve penetrated the market. Mention communication strategies, channels of distributions, sales activities, etc. What promotional discounts and advertising methods are you going to use? You must tailor your strategy to your particular market. For example, some business owners hire people to stand on high-traffic sidewalks to promote various products ranging from watches and purses to cheesecake.
6. Product Description
What is it that you are selling? How is it going to help customers? In your service or product description, talk about how your offering will benefit customers. Include details about research and development activities, the product life cycle, possible intellectual property issues, etc. The answers to these questions will affect business sustainability. Be sure to include any copyrights and patents you may have.
If you’re requesting funding, then you must include all financial data – things like the company’s income statements, cash flows for the past few years, balance sheets, etc. State financial projections on the new service or product. Make realistic predictions that clearly state how you will generate cash flow in the future. If possible, base your projections on current financial statements. This helps provide a clear indication to lenders on how accurate your figures are.
8. Funding Request
In this part of the plan, mention how much you would like to borrow and how much money you will require over the next few years. Also, include how you’re going to repay this borrowed sum or how you will generate returns. How are you going to spend their money and when can investors see their money back?
A business plan is like a compass. It provides entrepreneurs with direction while enabling them to remain flexible and adaptable to the ebb and flow of the business cycle.